Near the end of the Black Hawk War the Potawatomi Indians, a branch of the Algonquian peoples, sold what is now Dundee to Illinois in 1835 and by 1840 almost all of this land had been settled. The first settlers actually arrived in the area in the fall of 1834, seeing the wigwams and campfires along the river. Jesse Newman, his wife and Joseph Russell who were prospectors, built a cabin along the east bank of the river a little more than a mile south of what later became the town of Dundee. The Newmans and Russell stayed only a short time, but staked their claim and returned a year later.

The Village of East Dundee was incorporated in 1871, four years after West Dundee. A historic district along the Fox River and stores on Main Street constitute the commercial part of East Dundee. The feed and coal store is now Dundee Lumber (which burned down in March 2007), the railway is a bicycle path, the train depot was rebuilt in 1984 as a Tourist Center

According to the United States Census Bureau, the village has a total area of 2.9 square miles (7.5 km²), of which, 2.7 square miles (6.9 km²) of it is land and 0.2 square miles (0.6 km²) of it (7.90%) is water.